BackIndia, Iran will try to resolve proposed Chabahar Port issue at foreign office consultation
The consultation will also take up the International North South Transport Corridor project linking India with Central Asia and other countries
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New Delhi: Officials representing India and Iran at Thursday’s foreign office consultation in New Delhi will attempt to resolve contentious issues related to the proposed Chabahar Port in Iran.
Two Indian government officials familiar with the development and part of negotiations attributed the delays to Iran changing terms and conditions for the port, and India seeking a better deal after initially giving in. The officials who declined to be identified said Iran did not disclose that it had leased out Chabahar Port to an Iranian company Arya Bandar at the time of signing the memorandum of understanding on May 6, 2015.
The officials mentioned above said several things have changed since the MoU (memorandum of understanding) has been signed and this is what is delaying a final agreement, despite three rounds of negotiations and two deadline extensions. The latest deadline is 6 March 2016. The discussions now centre on resolving conditions that both sides consider each other to be imposing. They said, “We are keen to close the deal, but Iran is not trying to agree to our terms. It has to be win-win situation for both the countries."
The consultation will also take up the International North South Transport Corridor (INSTC) project linking India with Central Asia and other countries, and regional and international issues such as the rise of the Sunni militant Islamic State and peace talks in Afghanistan. The INSTC is a project to link India and Iran via the sea route and then through Iran to the Caspian sea onwards to Central Asia.
The Indian delegation will be led by foreign secretary S Jaishankar while the Iranian side is to be led by deputy foreign minister Ibrahim Rahimpour.
This is one of the first interactions between the two countries since crippling sanctions imposed by the international community on Iran for its suspect nuclear programme were lifted last month.
India and Iran agreed in 2003 to develop a port at Chabahar on the Gulf of Oman, near Iran’s border with Pakistan, but the venture has made little progress because of Western sanctions on Iran.
India is going to take development of Chabahar Port in two phases. Phase I involves installation of equipment and operating the two fully constructed berths (a container terminal of 640 metres and a multi-purpose cargo terminal of 600 metres) and Phase II where India would construct, operate and maintain a container terminal.
After signing MoU, an Indian team that visited Iran in July 2015 was surprised by an Iranian announcement that the port had been let out in February last year on a long lease to Arya Bandar, a private Iranian company. This was something that was not disclosed at the time of signing of the MoU.
An Indian government official on condition of anonymity said, “The leasing of port changed things for India entirely as earlier it was a deal between Indian and Iranian governments. However, with a private company coming into picture, things became complicated as all clearances from government/Cabinet had to be re-initiated. However, India gave in by allowing Arya Bandar to join the negotiations."
Mint has learnt from Iranians familiar with the development that this particular hurdle was cleared at a meeting between Iran’s President Hassan Rouhani and Prime Minister Narendra Modi in Ufa in Russia in May, on the sidelines of the Shanghai Cooperation Organisation meeting.
Ministry of external affairs spokesman Vikas Swarup on his part said India is “totally committed to this (Chabahar) project and is working with the relevant ministries to ensure that this does not get delayed."
Now, the discussions are on resolving conditions that both sides consider the other to be imposing.
“Iranians wanted Indian Ports Global Pvt. Ltd (IPGPL), the Indian company that would undertake work on Chabahar Port, to pay a fine of $85,000 per day for delays. However, when India asked the same (to be made) applicable for delays from Iran, they refused to apply the same condition on their delays," said an official participating in negotiations, who did not want to be identified.
The ministry of shipping has assigned IPGPL the task of equipping and operating container and multi-purpose terminals at Chabahar.
While Iran is pressing for speedy release of credit of $150 million for equipment, it has failed to provide the Indian company with basic infrastructure like office space to starts basic operations.
When asked for a response, the Iranian embassy in New Delhi did not comment. But Iran’s ambassador to India Gholamreza Ansari was quoted as saying last month by the Iranian news agency IRNA that the Indian government was delaying the implementation of many agreements already signed including investment in Chabahar Port development.
Chabahar, located in Sistan-Balochistan province on Iran’s southeastern coast, is of great strategic utility for India which will get sea-land access route to Afghanistan bypassing Pakistan.
The port is to be used to ship crude oil and urea, saving India transportation costs. India intends to lease two berths at Chabahar for 10 years. It will be developed through a special purpose vehicle (SPV) which will invest $85.21 million to convert the berths into a container terminal and a multi-purpose cargo terminal.
Besides Chabahar, the second connectivity issue on the agenda is the North-South Corridor. India is looking to use this corridor to ship goods to Central Asia through Nhava Sheva (Mumbai), Bandar Abbas (Iran), Tehran, Bandar Anzali (Iran) and Astrakhan (Russia).
Points of contention on Chabahar
There are over two-dozen issues where India and Iran are unable to reach agreement.
1. Custom duty on equipment: India would be exporting and installing equipment worth $150 million on Chabahar Port and the custom duty would be around $8-10 million. India argues that since the equipment would remain with the Iranian port once India leaves its operations, the custom duty should be waived. Iran does not agree.
2. Change in equipment specifications: Iran has changed specification of the equipment to be supplied to the Chabahar Port and installed in 18 months. The change in specifications has led to escalation of costs.
3. Foodgrains export from Chabahar: Iran has refused to allow India to export foodgrain and other humanitarian aid to Afghanistan via Chabahar from the two terminals that would be allotted to India.
4. Contract Termination Payment: The formula for contract termination payment considers depreciation impact twice, decreasing India’s revenue.
5. Fines for delays: India wants Iran’s government to stand guarantee for the Iranian company Arya Bandar if it defaults, but Iran does not agree. On the contrary, if the India fails to install all equipment within stipulated 18 months time, it would be liable to pay $85,000 per day.
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